South African economy stumbles as longest strike rolls on

Miners and mine service workers, many of them affected by the ongoing platinum mine strike, line up to get food handouts from the group Gift of the Givers on a rugby field in Rustenburg, South Africa.

Miners and mine service workers, many of them affected by the ongoing platinum mine strike, line up to get food handouts from the group Gift of the Givers on a rugby field in Rustenburg, South Africa. (Kim Ludbrook / European Pressphoto Agency)

As the longest strike in South Africa's history ground on Tuesday, the governor of the Reserve Bank offered a wintry assessment: even if the country narrowly avoids recession, a small growth rate will offer investors little comfort.

Gov. Gill Marcus called on the government, employers and workers to do something to halt the downhill slide of the economy. She said South Africa’s weak performance was not due to global factors but “largely self-inflicted” problems.

"The solutions are in our own hands. As a country, instead of focusing on whether we are entering a recession or not, we should all be striving to restore the economy to the strong growth path that it is capable of achieving," she told at business breakfast.

The miners' strike in its 21st week has shut down 45% of global platinum production and cost platinum producers and workers a combined $3.3 billion since January. Talks broke down Monday, with no sign of significant compromise.

With ratings agencies expect to downgrade the country's credit rating in the coming days, the dismal economic performance has focused attention on South Africa's weak leadership. President Jacob Zuma appears to be caught between the economic pragmatists and the radicals in the governing African National Congress (ANC) as well as its partners in and out of the union movement, offering no clear direction on the economy.

South Africa strikes

Mujahid Safodien / Agence France-Presse / Getty Images

South Africa's minister of mines, Ngoako Ramatlhodi, addresses the media in Pretoria on June 10.

South Africa’s economy shrank slightly in the first quarter because of the platinum strike, which some fear will eventually push the economy into recession.

Although South Africa has the continent's second-largest economy after Nigeria, it has lagged far behind many African countries in growth. That has cheated the country out of the chance to reduce its high unemployment rate, which is particularly severe among young people, many of whom face a lifetime without formal work.

Zuma’s recently appointed minister of mines, Ngoako Ramatlhodi, on Monday pulled out of a mediation effort designed to bring the strike of about 70,000 workers to an end. Workers are demanding that entry-level wages be doubled to about $1,200 a month.

Instead of focusing on whether we are entering a recession or not, we should all be striving to restore the economy to the strong growth path that it is capable of achieving.— South Africa Reserve Bank Gov. Gill Marcus, who says the country's weak economic performance is "largely self-inflicted"

Ramatlhodi said Tuesday he hoped his move would help bring both sides to their senses. “We can’t have indefinite negotiations,” he said.

During parliamentary elections last month, Zuma and the ANC survived a militant challenge from the Economic Freedom Party, which backs the strike and wants to nationalize banks, mines and land. In the face of that pressure, Zuma waffled vaguely about the need for radical change to improve people’s lives, offering scant detail.

The platinum strike also follows the emergence last year of the Assn. of Mineworkers and Construction Union, a radical union that has taken on ANC-allied National Union of Mineworkers, carving out members in the platinum sector by promising to deliver benefits. The new union and the Economic Freedom Party appear to share close links.

But as the strike drags on and workers and miners’ families are hurt, Marcus said Tuesday that platinum mine operators -- Anglo American Platinum, Impala Platinum and Lonmin -- will restructure their operations in the wake of the strike. She warned some mine shafts may remain closed, with some workers not being reemployed.

“Even if a settlement were achieved today and workers returned to work soon thereafter, it would take weeks for normal operations to resume," she said.

The companies released a statement after the breakdown of negotiations Monday, saying they were committed to a negotiated settlement but would now “review further options” prompting speculation that the miners might shut down some operations to cut losses.

ANC Secretary-General Gwede Mantashe has blamed “foreign forces” that wished to destabilize the South African economy for the strike.

A group set up to provide support and food parcels to the mine workers, the Gauteng Miners’ Strike Support Committee, on Tuesday picketed the headquarters of the Chamber of Mines and Anglo American Platinum in Johannesburg. Spokesman Trevor Ngwane told local media that "the time for cheap labor is finished in South Africa.”

“The companies must pay workers a living wage and they must stop making super profits at the expense of poor, working-class people,” he said.